[Following are excerpts from the current issue of the Weekend Update at  Iacono Research.]

Strong demand for an alternative to paper money after the European debt crisis again took a turn for the worse and leaders from both the European Union and central bank announced a $1 trillion bailout package saw the gold price surge in euro terms and go on the make new all-time highs when measured in U.S. dollars at $1,249 an ounce.

Heavy inflows to gold ETFs – more than 50 tonnes in the last seven days for the SPDR Gold Shares ETF (NYSE:GLD) – confirmed that investor interest has again ratcheted up though the silver price saw an even bigger rise. For the week, the spot gold price rose two percent, from $1,206 an ounce to $1,231, and silver gained five percent, from $18.35 an ounce to $19.34.

What has astonished many investors lately is that, while the gold price is understandably rising sharply against the euro, it is also moving higher against the U.S. dollar, something that many pundits thought to be unlikely given the historical relationship between the trade-weighted dollar and gold (an idea that I’ve railed against for some time now because there is no fundamental reason for the inverse relationship to exist). It would seem that either investors are losing confidence in all paper money or they figure that Europe’s troubles will eventually cross the Atlantic and are bidding prices higher in advance of that.

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